| − | The above list is all that is on the CLEP exam, in the percentages shown. At first glance, the CLEP exam may not seem biased. But it is. The CLEP exam omits important concepts like the invisible hand, free market, charity, transaction costs, the time value of money, interest rates, the Coase theorem and Gresham's Law. Why does the CLEP ignore these fundamental aspects of economics? Because each of these concepts tend to lead students toward truthful, but conservative, conclusions. For example, once a student realizes how inefficient transaction costs are, he or she will probably not like government regulations much! Instead of these concepts, the CLEP exam adds lots of questions about government regulation that cast it in a positive light. Also, even when the CLEP exam does include certain topics like opportunity cost, it asks less about them than it should.
| + | Some important topics are missing from the CLEP exam, such as the invisible hand, free market, charity, transaction costs, the time value of money, interest rates, the Coase theorem and Gresham's Law. The reason is bias. For example, once a student realizes how inefficient transaction costs are, he or she will probably not like government regulations much! Instead of these concepts, the CLEP exam adds lots of questions about government regulation to try to make regulation look good. |
| − | But don't think most of the CLEP questions and answers are biased. They are not. Nearly all of the questions on the CLEP exam have unbiased, correct answers. The only exceptions where political bias becomes a factor are a few questions about government regulation. For these few questions, the CLEP exam pretends that government regulation can make a market ''more'' efficient. This is untrue, as proven by the Coase theorem, but the CLEP exam writers want people to think that more regulation is somehow good, and that government can somehow make a market more efficient. | + | But other than bias in the selection of question, the CLEP exam does not have bias in its answers. The rare exceptions are a few questions about government regulation. For these few questions, the CLEP exam pretends that government regulation can make a market ''more'' efficient. This is untrue, as proven by the Coase theorem, but the CLEP exam writers want people to think that government can somehow improve on the free market. |
| | When government regulates labor, the analysis is similar to its regulation of price. A “price floor” is created by the minimum wage: the buyer (an employer) must pay at least a certain amount for a service (labor). The minimum wage creates an oversupply of the service: too many workers. Not all of them will be able to obtain jobs at a wage higher than equilibrium. Unemployment results from a minimum wage that is higher than the equilibrium wage. | | When government regulates labor, the analysis is similar to its regulation of price. A “price floor” is created by the minimum wage: the buyer (an employer) must pay at least a certain amount for a service (labor). The minimum wage creates an oversupply of the service: too many workers. Not all of them will be able to obtain jobs at a wage higher than equilibrium. Unemployment results from a minimum wage that is higher than the equilibrium wage. |
| | As always, be sure you fully understand the question before you answer it, and use common sense and logic. In fact, many of the questions can be answered correctly with basic reasoning skills. | | As always, be sure you fully understand the question before you answer it, and use common sense and logic. In fact, many of the questions can be answered correctly with basic reasoning skills. |